The American multinational technology company, Apple Inc. (NASDAQ: AAPL) seems to be gearing up for a surge after correction, as per its latest charts.
Bullish Indications
#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level generally acts as a good support level. Currently, the stock is trading near this breakout level. Once it reaches to the breakout level, it appears to be a good area for reversal.
Daily Chart – AAPL
#2 Oversold RSI: The RSI is currently near oversold levels and moving higher, indicating possible bullishness.
#3 RSI -Price Bullish Divergence: There is a bullish divergence between RSI and price in the daily chart.
While the price formed a lower low, the RSI formed to a higher low.
This is marked as blue dotted lines in the chart.
A bullish divergence is usually the sign of a possible upmove in the near-term.
#4 Bollinger support: The weekly chart shows that the stock has currently taken support at the lower Bollinger band. This is a possible bullish sign.
Weekly Chart – AAPL
#5 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. AAPL has currently taken support at its 50% retracement level as seen in the weekly chart. This seems like a good support area for the stock.
#6 Oversold RSI: The weekly chart also shows that the RSI is currently near oversold levels. This points to the possibility of a bullish reversal in the near-term.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for AAPL is around $223.
However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of AAPL if it trades above yesterday’s close. This translates to a price of around $247.
TP: Our target prices are $240 and $260 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $213 (For entry near $223) and $241 (For entry near $247) Note that this stop loss is on a closing basis.
Our target potential upside is 5% to 17% in the next 4-6 months.
- Entry near $223: For a risk of $10.00, the target rewards are $17.00 and $37.00. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $247: For a risk of $6.00, our target reward (TP#2) is $13.00. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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